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KB Home, AMC Networks, Apple, Amazon and Google highlighted as Zacks Bull and Bear of the Day
Read MoreHide Full Article
For Immediate Release
Chicago, IL – February 18, 2021 – Zacks Equity Research Shares of KB Home (KBH - Free Report) as the Bull of the Day, AMC Networks Inc. (AMCX - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Apple Inc. (AAPL - Free Report) , Amazon.com, Inc. (AMZN - Free Report) and Alphabet Inc. (GOOGL - Free Report) .
If I had told you a year ago that we were about to experience a global pandemic that would cause restrictions into nearly every aspect of everyday life, but also that the market for residential real estate would not only hold up just fine, but soar to news highs, you would have thought I was crazy, right?
Yet that’s exactly what happened.
A number of unexpected factors have lined up over the past year to boost the value of existing homes and increase demand for new constructions and KB Home has been in a position to capitalize.
First, interest rates are at or near all-time lows and 30-year fixed rate mortgages have been available at interest rates below 3% annually – making homes more affordable to the average purchaser even as prices rise.
Second, members of the “millennial” generation are now 25-40 years old and many are seriously considering homeownership for the first time. Having grown up during the financial crisis of 2008-09, millennials were understandably wary of being pinned down – financially and geographically – by owning their primary residence and spent the next decade with a preference for rentals.
Predictably, stable jobs and the establishment of new families have changed those preferences and millennials have become a driving force in the residential real estate market.
You might think that stubbornly high unemployment would interfere with the housing market rally, but the reality is that most of the positions that haven’t yet been regained are relatively low-paid service jobs. Those at the middle and upper income ranges haven’t seen an appreciable drop in incomes – and are still buying houses.
In fact, the “work-from-home” movement has actually helped fuel the rise in housing prices. Having spent more time at home in the past year than at any other time in their lives, homeowners have been improving their spaces in record numbers. That has caused a shortage of skilled labor and materials, driving up the costs of construction as it also adds to the value of existing homes.
Many employers expect that some or all of their employees will continue to work remotely even after Covid restrictions are lifted, so the demand for well-appointed living/working spaces is likely to stay strong even when the pandemic is over.
The final way in which the pandemic has boosted the real estate market is the way it has shifted consumer preferences for larger homes that are farther from concentrated city areas. That trend plays directly to the strengths of builders of new residences like KB Home.
The classic strategy for residential homebuilders is to purchase or option land adjacent to urban areas, then construct new homes to sell as demand increases. With urban populations across the country growing in the areas in which KB Home operates, the company has been running historic order backlogs as they fill one sold-out development after another.
Split into four geographical regions, KB Home serves the fastest growing states in the US – both in terms of population and property values. Washington, California, Arizona, Nevada, Colorado, Texas, Florida and North Carolina are all part of the company’s core strategy. As of the end of the most recent quarter, KBH had an order backlog of more than 7,800 homes representing almost $3 billion in recognizable revenues.
Because of the limitations of offering physical products that take months or years to build, revenues and profits at the homebuilders can’t skyrocket the same way they might for software or other technology companies, but like a locomotive, once they get moving they pick up speed and keep moving in the same direction for years at a time.
After big beats of the Zacks Consensus Earnings Estimate in the previous two quarters, forecasts for current year earnings have risen by 20% in the past 60 days – contributing to a Zacks Rank #1 (Strong Buy). While the shares have made a significant recovery from the lows in March 2020, at current levels, KBH trades at a 12-month forward P/E Ratio of less than 9X and pays a dividend yield of 1.35%.
Most Americans find that their home is their single largest investment, but with the stars lined up for continued strength in the coming years, exposure to home building stocks is an important part of the portfolio as well.
Over the past month, we saw the meteoric rise and gut-wrenching fall of the shares of GameStop. The move started with a short squeeze in which individual investors ferreted out a huge level of short interest and ran the price up, forcing some large hedge fund traders to cover their positions at big losses. The trade worked so well – for a little while at least – that traders went looking for other short-squeeze targets to attack next, one of which was the struggling movie theater chain AMC Entertainment Holdings.
Today’s Bear of the Day is not that AMC.
AMC Networks operates several cable channels including IFC, BBC America and Sundance as well as two production companies and several small streaming services. The migration toward a streaming model is complicating the outlook for smaller entertainment companies and AMCX is feeling the squeeze.
When Netflix successfully transitioned from a DVD-by-mail company to the world’s largest provider of streaming entertainment content, it set in motion a sea-change in the industry that continues to play out before our eyes.
If you have teenagers or young adults at home, you may have noticed that your credit card bill is swelling lately with monthly charges from streaming video services. In addition to Netflix, you might also subscribe to Disney+, Hulu and ESPN+ (both Disney products), Amazon Prime Video and Apple TV. With “must-see” original programming that’s available only on specific streaming networks, it’s not difficult to spend $50-100/month on video entertainment – and possibly more if you also include Spotify or Sirius for streaming music.
Disney emerged as the first large-scale challenger for Netflix and analysts wondered what the consumer tolerance would be for monthly streaming costs. Aided by hundreds of millions of people spending large amounts of time at home, Disney grew its streaming services so quickly that the revenues are helping fill the shortfall from in-person experiences like theme parks and cruise ships.
Consumer appetites for more streaming entertainment and the monthly charges they bring with them turned out to be larger than many observers predicted, but they’re not infinite. Many smaller entertainment companies are feeling the squeeze, experiencing smaller audiences for traditional cable service but also not able to gain a foothold in the crowded streaming market.
AMC Networks has been on the wrong side of the trade with 2020 revenues that are expected to have declined 10% with earnings down 26%. For comparison, Netflix will grow by revenues by 19% and earnings by 59% this year.
A recent appreciation in share price has not been accompanied by increased earnings expectations and AMCX remains a Zacks Rank #5 (Strong Sell).
Streaming is not going to be a winner-take-all battle. There’s room for several companies who own and/or create desirable content to thrive, but it’s going to be a difficult situation for the smaller players without the resources to buy or create big-budget content. With a share price that has appreciated more than 150% since April of 2020, AMC Networks is a riskier investment than the more established services.
Additional content:
Stocks to Watch Amid Rising Adoption of Digital Payment
Digital payment is gradually emerging as one of the most convenient ways of paying as it involves a hassle-free and contactless transaction. Users can enjoy the comfort of transacting quite simply from devices such as their smartphones and avoid carrying cash. Notably, per a report by Grand View Research, the global digital payment market was valued at $58.3 billion in 2020 and is set to witness a CAGR of 19.4% from 2021 to 2028.
The report stated that the main factors expected to contribute to the growth are the rising adoption of smartphones as well as increasing e-commerce sales and improving global Internet penetration. Moreover, governments around the world are also taking initiatives to boost the adoption of digital payments.
Notably, the COVID-19 pandemic proved to be instrumental in boosting both e-commerce sales and digital payments. As people were compelled to maintain social distancing to curb the spread of the virus, they had to resort to online purchasing and embrace digital payments as a safe means of transaction.
In fact, the Grand View Research report stated that the payment processing segment accounted for more than 25% share of the global revenue in 2020. This is due to the increasing preference for online shopping throughout the world, which is prompting retailers to “adopt payment processing solutions to provide customers with seamless checkout experiences.”
Notably, the report also mentioned that North America accounted for over 35% of the global digital payment market revenues in 2020. In fact, per a survey by McKinsey in the United States last year, penetration of digital payment reached 78% in 2020. Moreover, the survey showed significant gains from 45% in 2019 to 58% in 2020 in the share of consumers who were using two or more digital payment methods. The survey mentioned that the rising adoption indicated a deeper level of digital engagement and could be partly attributed to a pandemic-related behavior. Such developments are sure to help the digital payment method in becoming an increasingly preferred choice among consumers.
3 Stocks to Keep an Eye On
The digital payment market seems poised to witness further adoption as consumers continue to shift to this hassle-free form of transaction. Hence, this makes it a good time to keep an eye on companies focused on digital payments that stand to benefit from this continued upswing. Notably, we have selected four such stocks that carry a Zacks Rank #1 (Strong Buy) or 3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.
Apple designs, manufactures, and markets smartphones, personal computers, tablets, wearables and accessories worldwide. Notably, the company has its own cashless payment service called Apple Pay which allows users to make contactless and secure purchases in stores, in apps and on the web. The company currently has a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings increased 11.5% over the past 60 days. The company’s expected earnings growth rate for the current year is 36.3%.
Amazon.com engages in the retail sale of consumer products and subscriptions in North America and internationally. Notably, the company has its own online payment processing service named Amazon Pay. The company currently has a Zacks Rank #3. The Zacks Consensus Estimate for its current-year earnings increased 10.3% over the past 60 days. The company’s expected earnings growth rate for the current year is 18.1%.
Alphabet provides online advertising services in the United States, Europe, the Middle East, Africa, the Asia-Pacific, Canada, and Latin America. It operates through the Google Services, Google Cloud, and Other Bets segments. Notably, Google has its own digital payment platform called Google Pay, which enables users to make payments using their smart devices.
The company currently has a Zacks Rank #3. The Zacks Consensus Estimate for its current-year earnings increased 10.5% over the past 60 days. The company’s expected earnings growth rate for the current year is 17.5%.
Legal Marijuana: An Investor’s Dream
Imagine getting in early on a young industry primed to skyrocket from $17.7 billion in 2019 to an expected $73.6 billion by 2027.
Although marijuana stocks did better as the pandemic took hold than the market as a whole, they’ve been pushed down. This is exactly the right time to get in on selected strong companies at a fraction of their value before COVID struck. Zacks’ Special Report, Marijuana Moneymakers, reveals 10 exciting tickers for urgent consideration.
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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KB Home, AMC Networks, Apple, Amazon and Google highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – February 18, 2021 – Zacks Equity Research Shares of KB Home (KBH - Free Report) as the Bull of the Day, AMC Networks Inc. (AMCX - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Apple Inc. (AAPL - Free Report) , Amazon.com, Inc. (AMZN - Free Report) and Alphabet Inc. (GOOGL - Free Report) .
Here is a synopsis of all five stocks:
Bull of the Day:
If I had told you a year ago that we were about to experience a global pandemic that would cause restrictions into nearly every aspect of everyday life, but also that the market for residential real estate would not only hold up just fine, but soar to news highs, you would have thought I was crazy, right?
Yet that’s exactly what happened.
A number of unexpected factors have lined up over the past year to boost the value of existing homes and increase demand for new constructions and KB Home has been in a position to capitalize.
First, interest rates are at or near all-time lows and 30-year fixed rate mortgages have been available at interest rates below 3% annually – making homes more affordable to the average purchaser even as prices rise.
Second, members of the “millennial” generation are now 25-40 years old and many are seriously considering homeownership for the first time. Having grown up during the financial crisis of 2008-09, millennials were understandably wary of being pinned down – financially and geographically – by owning their primary residence and spent the next decade with a preference for rentals.
Predictably, stable jobs and the establishment of new families have changed those preferences and millennials have become a driving force in the residential real estate market.
You might think that stubbornly high unemployment would interfere with the housing market rally, but the reality is that most of the positions that haven’t yet been regained are relatively low-paid service jobs. Those at the middle and upper income ranges haven’t seen an appreciable drop in incomes – and are still buying houses.
In fact, the “work-from-home” movement has actually helped fuel the rise in housing prices. Having spent more time at home in the past year than at any other time in their lives, homeowners have been improving their spaces in record numbers. That has caused a shortage of skilled labor and materials, driving up the costs of construction as it also adds to the value of existing homes.
Many employers expect that some or all of their employees will continue to work remotely even after Covid restrictions are lifted, so the demand for well-appointed living/working spaces is likely to stay strong even when the pandemic is over.
The final way in which the pandemic has boosted the real estate market is the way it has shifted consumer preferences for larger homes that are farther from concentrated city areas. That trend plays directly to the strengths of builders of new residences like KB Home.
The classic strategy for residential homebuilders is to purchase or option land adjacent to urban areas, then construct new homes to sell as demand increases. With urban populations across the country growing in the areas in which KB Home operates, the company has been running historic order backlogs as they fill one sold-out development after another.
Split into four geographical regions, KB Home serves the fastest growing states in the US – both in terms of population and property values. Washington, California, Arizona, Nevada, Colorado, Texas, Florida and North Carolina are all part of the company’s core strategy. As of the end of the most recent quarter, KBH had an order backlog of more than 7,800 homes representing almost $3 billion in recognizable revenues.
Because of the limitations of offering physical products that take months or years to build, revenues and profits at the homebuilders can’t skyrocket the same way they might for software or other technology companies, but like a locomotive, once they get moving they pick up speed and keep moving in the same direction for years at a time.
After big beats of the Zacks Consensus Earnings Estimate in the previous two quarters, forecasts for current year earnings have risen by 20% in the past 60 days – contributing to a Zacks Rank #1 (Strong Buy). While the shares have made a significant recovery from the lows in March 2020, at current levels, KBH trades at a 12-month forward P/E Ratio of less than 9X and pays a dividend yield of 1.35%.
Most Americans find that their home is their single largest investment, but with the stars lined up for continued strength in the coming years, exposure to home building stocks is an important part of the portfolio as well.
Bear of the Day:
Over the past month, we saw the meteoric rise and gut-wrenching fall of the shares of GameStop. The move started with a short squeeze in which individual investors ferreted out a huge level of short interest and ran the price up, forcing some large hedge fund traders to cover their positions at big losses. The trade worked so well – for a little while at least – that traders went looking for other short-squeeze targets to attack next, one of which was the struggling movie theater chain AMC Entertainment Holdings.
Today’s Bear of the Day is not that AMC.
AMC Networks operates several cable channels including IFC, BBC America and Sundance as well as two production companies and several small streaming services. The migration toward a streaming model is complicating the outlook for smaller entertainment companies and AMCX is feeling the squeeze.
When Netflix successfully transitioned from a DVD-by-mail company to the world’s largest provider of streaming entertainment content, it set in motion a sea-change in the industry that continues to play out before our eyes.
If you have teenagers or young adults at home, you may have noticed that your credit card bill is swelling lately with monthly charges from streaming video services. In addition to Netflix, you might also subscribe to Disney+, Hulu and ESPN+ (both Disney products), Amazon Prime Video and Apple TV. With “must-see” original programming that’s available only on specific streaming networks, it’s not difficult to spend $50-100/month on video entertainment – and possibly more if you also include Spotify or Sirius for streaming music.
Disney emerged as the first large-scale challenger for Netflix and analysts wondered what the consumer tolerance would be for monthly streaming costs. Aided by hundreds of millions of people spending large amounts of time at home, Disney grew its streaming services so quickly that the revenues are helping fill the shortfall from in-person experiences like theme parks and cruise ships.
Consumer appetites for more streaming entertainment and the monthly charges they bring with them turned out to be larger than many observers predicted, but they’re not infinite. Many smaller entertainment companies are feeling the squeeze, experiencing smaller audiences for traditional cable service but also not able to gain a foothold in the crowded streaming market.
AMC Networks has been on the wrong side of the trade with 2020 revenues that are expected to have declined 10% with earnings down 26%. For comparison, Netflix will grow by revenues by 19% and earnings by 59% this year.
A recent appreciation in share price has not been accompanied by increased earnings expectations and AMCX remains a Zacks Rank #5 (Strong Sell).
Streaming is not going to be a winner-take-all battle. There’s room for several companies who own and/or create desirable content to thrive, but it’s going to be a difficult situation for the smaller players without the resources to buy or create big-budget content. With a share price that has appreciated more than 150% since April of 2020, AMC Networks is a riskier investment than the more established services.
Additional content:
Stocks to Watch Amid Rising Adoption of Digital Payment
Digital payment is gradually emerging as one of the most convenient ways of paying as it involves a hassle-free and contactless transaction. Users can enjoy the comfort of transacting quite simply from devices such as their smartphones and avoid carrying cash. Notably, per a report by Grand View Research, the global digital payment market was valued at $58.3 billion in 2020 and is set to witness a CAGR of 19.4% from 2021 to 2028.
The report stated that the main factors expected to contribute to the growth are the rising adoption of smartphones as well as increasing e-commerce sales and improving global Internet penetration. Moreover, governments around the world are also taking initiatives to boost the adoption of digital payments.
Notably, the COVID-19 pandemic proved to be instrumental in boosting both e-commerce sales and digital payments. As people were compelled to maintain social distancing to curb the spread of the virus, they had to resort to online purchasing and embrace digital payments as a safe means of transaction.
In fact, the Grand View Research report stated that the payment processing segment accounted for more than 25% share of the global revenue in 2020. This is due to the increasing preference for online shopping throughout the world, which is prompting retailers to “adopt payment processing solutions to provide customers with seamless checkout experiences.”
Notably, the report also mentioned that North America accounted for over 35% of the global digital payment market revenues in 2020. In fact, per a survey by McKinsey in the United States last year, penetration of digital payment reached 78% in 2020. Moreover, the survey showed significant gains from 45% in 2019 to 58% in 2020 in the share of consumers who were using two or more digital payment methods. The survey mentioned that the rising adoption indicated a deeper level of digital engagement and could be partly attributed to a pandemic-related behavior. Such developments are sure to help the digital payment method in becoming an increasingly preferred choice among consumers.
3 Stocks to Keep an Eye On
The digital payment market seems poised to witness further adoption as consumers continue to shift to this hassle-free form of transaction. Hence, this makes it a good time to keep an eye on companies focused on digital payments that stand to benefit from this continued upswing. Notably, we have selected four such stocks that carry a Zacks Rank #1 (Strong Buy) or 3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.
Apple designs, manufactures, and markets smartphones, personal computers, tablets, wearables and accessories worldwide. Notably, the company has its own cashless payment service called Apple Pay which allows users to make contactless and secure purchases in stores, in apps and on the web. The company currently has a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings increased 11.5% over the past 60 days. The company’s expected earnings growth rate for the current year is 36.3%.
Amazon.com engages in the retail sale of consumer products and subscriptions in North America and internationally. Notably, the company has its own online payment processing service named Amazon Pay. The company currently has a Zacks Rank #3. The Zacks Consensus Estimate for its current-year earnings increased 10.3% over the past 60 days. The company’s expected earnings growth rate for the current year is 18.1%.
Alphabet provides online advertising services in the United States, Europe, the Middle East, Africa, the Asia-Pacific, Canada, and Latin America. It operates through the Google Services, Google Cloud, and Other Bets segments. Notably, Google has its own digital payment platform called Google Pay, which enables users to make payments using their smart devices.
The company currently has a Zacks Rank #3. The Zacks Consensus Estimate for its current-year earnings increased 10.5% over the past 60 days. The company’s expected earnings growth rate for the current year is 17.5%.
Legal Marijuana: An Investor’s Dream
Imagine getting in early on a young industry primed to skyrocket from $17.7 billion in 2019 to an expected $73.6 billion by 2027.
Although marijuana stocks did better as the pandemic took hold than the market as a whole, they’ve been pushed down. This is exactly the right time to get in on selected strong companies at a fraction of their value before COVID struck. Zacks’ Special Report, Marijuana Moneymakers, reveals 10 exciting tickers for urgent consideration.
Download Marijuana Moneymakers FREE >>
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Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.